The Chinese gold yuan (also known as golden round, golden yuan, among others) was a defunct legal tender currency of China between August 1948 and 1949. It was a method used by the Republic of China government to accumulate gold from its citizens in preparation to relocate to Taiwan. It circulated in the country under the effective control of the Government of the Republic of China known as Taiwan Province, R.O.C., which issued paper money on August 19, 1948. This currency was notorious for vicious inflation due to inadequate issuance preparation and failure to strictly enforce issuance limits. In the early days of the issuance of the Golden yuan, the government used executive actions to force the public to exchange gold, foreign currency for the new currency. The legal exchange rate was 0.22217 grams of gold per gold yuan but it could not be honored. The sharply depreciating Fabi currency was at the rate of one golden yuan of the yen to Fabi $3 million, and this rate was used for the compulsory collection of public gold, silver, and foreign currency. In particular, the economic losses suffered by the urban middle class were so great that the ROC government lost its original most important supporters and was one of the reasons why the ROC government failed so quickly in the Chinese Civil War.
After the failure of the issuance of the Golden Yuan, the government of the Republic of China immediately issued Silver Yuan, but it was soon rejected in circulation, and the Chinese golden yuan was recalled by Central People's Government with the RMB; the people's government announced from June 1949 to stop the circulation of the Golden Yuan, and its replacement for the modern-day yuan at a rate of 100,000 yuan to 1 yuan.
Issue background
The purpose of the issuance of a new currency was to replace the original hyperinflated Fabi currency that was issued by the Nationalist government since 1935. During the Second Sino-Japanese War, Fabi currency was issued in large quantities due to increased fiscal expenditure. After the war, the number of Fabi currency issued by the National Government to pay for the huge military costs of the war against the Communists increased rapidly from $556.9 billion at the time of the victory of the war to $604 trillion in August 1948, an increase of over a thousand times in less than three years.
In terms of the size of the currency supply, it consisted of $1.4 billion before the war. In early 1947, Fabi currency issues totaled 3.5 trillion, rising to over 10 trillion by July. With no real increase in government inventories gold, foreign currency, such huge issuances led to the extreme inflation. In the beginning, some paper mills were profiting from the use of low-denomination Fabi currency resource recovery as raw material for paper making. Song Ziwen, when he was in Executive charge of the Yuan, tried to stabilize the Fabi currency with a financial policy of selling inventory gold to buy back the Fabi currency. But it was fruitless because the Fabi currency kept being issued massively, so it couldn't be fully backed by gold.
After the constitutional election in May 1948, Weng Wen-ho became Executive Yuan Head and Wang Yun-five was appointed Minister of Finance and began planning for monetary reform. At the same time, Chiang arranged for Yu Hongjun, former Minister of Finance and former president of the Central Bank, to also draw up a proposal for currency reform. The drafting team, led by central bank experts organized by Yu Hongjun, believes that the Fabi currency can be maintained for some time without fundamental reform, and will collapse faster if fundamental reform is carried out.
The program elaborated by Yu's team focused mainly on the increase and improvement of fiscal revenues, proposing to use this special currency for all tax payments and foreign trade remittances without depreciating along with the Fabi currency, following the example of the 1937 tariffs levied by customs, which would increase the proportion of fiscal revenues to fiscal expenditures from more than 10 to 40 or 50 percent. The government's efforts to improve the economy and the economy of the country were not satisfactory, but Chiang was not satisfied with this and thought that it could not collect the country's gold, silver, and private foreign exchange reserves to cope with the difficult situation. At the meeting, Executive Yuan President Weng Wenhao, Foreign Minister -{ Wang Shijie}- and Central Bank President Yu Hongjun agreed.